recession

Euro-zone falls back into recession

Austerity protest

Plagued by seemingly perpetual debt problems due to large welfare states, the Euro-zone, the 17 countries that make up the European Union, has fallen into a recession for the second time since 2009:

The euro zone debt crisis dragged the bloc into its second recession since 2009 in the third quarter despite modest growth in Germany and France, data showed on Thursday.

The French and German economies both managed 0.2 percent growth in the July-to-September period but their resilience could not save the 17-nation bloc from contraction as the likes of The Netherlands, Spain, Italy and Austria shrank.

Economic output in the euro zone fell 0.1 percent in the quarter, following a 0.2 percent drop in the second quarter.

Those two quarters of contraction put the euro zone’s 9.4 trillion euro ($12 trillion) economy back into recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.

A rebound in Europe is still far off. The debt crisis that began in Greece in late 2009 is still reverberating around the globe and holding back a lasting recovery.

Analysts said even the euro zone’s top two economies were likely to succumb in the final three months of the year.

Tax the Rich: Play It Again, Sam…

Barack Obama

The problem with liars and obfuscators is that, over time, it becomes increasingly difficult to keep your story straight. Nowhere has that been more evident than in the Obama administration. Is it a tax or is it a penalty (Obama’s Solicitor General argued both sides on consecutive days before the Supreme Court in order to get the ObamaCare law upheld). Is marriage an institution pre-dating government which unites a man and a woman in a spiritual and legal union, or an oppressive anachronism based on antiquated definitions of morality? Obama has argued both sides. Are massive deficits “unpatriotic,” as he accused George Bush of being, or is it a way to stimulate the economy, as he now claims? If you like your health insurance plan, you can keep it under ObamaCare, right? Maybe not, as Obama now admits that nearly three quarters of current insurance plans will fail to meet new government standards. Is the Guantanamo Bay terrorist detention facility the symbol of America’s violation of basic human rights as Obama repeatedly claimed? If so, then why is it still open nearly three years after he promised the doors would shut?

Lies, Damned Lies, and Unemployment Statistics

Before Democrats, the Obama Administration, liberals, and progressives start crowing about the updated unemployment figures—which the Bureau of Labor Statistics say is now down to 8.6%—there’s something you should know about the why it is down—and it’s not pretty.

The BLS divides up the unemployment numbers into six figures, U-1 through U-6. U-3 is the “official” number, the one that’s always toted on the primetime news channels. U-6, however, is the real unemployment figure, which counts marginally attached workers (those that have stopped looking for work for the time being) and underemployed workers (those working part time but want full time work), among others. And the worst part is?

Even that is rosy compared to the “real truth.”

The truth comes in near the middle of the Bureau’s press release:

In November, the number of job losers and persons who completed temporary jobs declined by 432,000 to 7.6 million. The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 5.7 million and accounted for 43.0 percent of the unemployed. (See tables A-11 and A-12.)

The civilian labor force participation rate declined by 0.2 percentage point to 64.0 percent. The employment-population ratio, at 58.5 percent, changed little.(See table A-1.)

Emphasis mine.

The Proletariat Uprising Against Evil Corporations

With the economy in a sustained recession, unemployment at or above nine percent for approaching three years, and tens of millions of Americans struggling just to put food on their table, perhaps few people or organizations have been showered with such hostility and ill-repute as have “corporations.” Yet, of all of the root causes of our current economic malaise, such contempt may nowhere be more misplaced.

Obama, after the shellacking his party took in the 2010 elections and with no end in sight to the economic downturn, has turned to finding a scapegoat or two to deflect blame for the anger and frustration America feels. His two favorite targets are Republican “obstructionism” and those evil, faceless corporations that steal from the poor to sate their insatiable greed.

Maybe he has a point though. After all, we all know that Steve Jobs became one of the richest men in the world as the head of Apple by hiring legions on thugs to go out across America to households and college campuses, brandishing guns and clubs and threatening violence if the poor masses did not give these brutes their money in exchange for little pieces of molded plastic and silicon and copper which Jobs called “Macs” and “iPods”, “iPhones” and “iPads”. His reign of terror was so complete that every time Jobs released a new version of these little pieces of plastic, hundreds and thousands of people would camp out overnight at one of his stores to give up their money in exchange for these gadgets, in the hope that by voluntarily doing so his thugs would not show up at their homes, schools and places of businesses and threaten them there.

A candid moment from a member of the FOMC

Federal Reserve Chairman Ben Bernanke just announced Operation Twist, a new combat operation that will supposedly fix our market woes. Supposedly. (Hey, pass the vodka, will you? I need a drink before I listen to this guy.)

I am not a financial markets expert, and I have not heard that much on the actual details of Operation Twist, but, courtesy of CNN, here’s a brief explanation:

NEW YORK (CNNMoney) — The Federal Reserve announced “Operation Twist” Wednesday, a widely expected stimulus move reviving a policy from the 1960s.

The policy involves selling $400 billion in short-term Treasuries in exchange for the same amount of longer-term bonds, starting in October and ending in June 2012.

 

While the move does not mean the Fed will pump additional money into the economy, it is designed to lower yields on long-term bonds, while keeping short-term rates little changed.

The intent is to thereby push down interest rates on everything from mortgages to business loans, giving consumers and companies an additional incentive to borrow and spend money.

So basically, they’re selling bonds and buying bonds. Nothing exactly Earth shattering here. And definitely not anything that will get us out of this rut.

Interestingly, some members of the FOMC agree with my assessment, and one of them had a speech about it. Mr. Richard W. Fisher, president and CEO of the Federal Reserve Bank of Dallas, had this to say about recent monetary policy, using a Nordic weather station as a metaphor:

CHART OF THE DAY: Washington Fat Cats Are Getting Fatter

Welcome, Instapundit readers!

Ouch:

Federal regulatory jobs have grown at almost triple the pace of private sector jobs under Barack Obama

Investors Business Daily reports:

 

Under President Obama, while the economy is struggling to grow and create jobs, the federal regulatory business is booming.

Regulatory agencies have seen their combined budgets grow a healthy 16% since 2008, topping $54 billion, according to the annual “Regulator’s Budget,” compiled by George Washington University and Washington University in St. Louis.

That’s at a time when the overall economy grew a paltry 5%.

Meanwhile, employment at these agencies has climbed 13% since Obama took office to more than 281,000, while private-sector jobs shrank by 5.6%.

 

If you missed my piece the other day on recession-proof DC, check it out.

Also, pick up a copy of Iain Murray’s Stealing You Blind. In addition to being a scholar at the Competitive Enterprise Institute, Murray is an Englishman whose legal immigration to the U.S. took four years, no thanks to our bloated, inefficient bureaucracy.

DC Is Recession-proof, and Washingtonians Know It

I moved to Washington, DC two years ago for graduate school — apparently, as a freshly-credentialed MPP entering the job market, my timing was impeccable. But I can’t say I’m really happy about what it means more broadly for the direction in which the country is heading.

Catherine Rampell at the New York Times Economix blog reports (emphasis mine):

In every state, a majority of residents think the economy is getting worse. In the nation’s capital, however, a full 60 percent of people think the economy is getting better.

Cato’s David Boaz examined the reasons behind this dynamic here and here.

Reader’s Digest version: the Bush-Obama spending binge has spurred more growth in Washington, DC than anywhere else in the country. That’s because new federal agencies with new missions (or new missions at existing agencies) need new personnel. But beyond a simple expansion of the government itself came an expansion of the special interest class, eager to get its mitts on new waves of federal spending.

As if we didn’t have enough to worry about with millions unemployed across the country and new levels of uncertainty abounding, this doesn’t bode well for friends of the free market.

What can we do about it? Get involved.

Financial Q&A with Joe Magyer of The Motley Fool

With the recent action taken to downgrade our credit rating by Standard & Poor’s (S&P) and the significant decline in stocks over the last few days, I fired over a few questions to Joe Magyer, a financial advisor at The Motley Fool, UGA grad and friend. Hopefully, this will help you make at least some sense of what is going on right now. Also, make sure to check out Joe’s recent post, The 60-Second Guide to Recession-Proof Investing.

Q: What do you make of the downgrading in the United States’ credit rating?

JM: It is an embarrassment for our country, a blow to consumer confidence, and might ultimately cost us dearly later on. I can’t say I’m terribly surprised that Standard & Poor’s chose to downgrade the U.S, though. They drew a line in the sand when they said they’d want to see $4 trillion in cuts and our leaders didn’t deliver. Not that I give much credence to ratings agencies’ opinions to begin with. Collectively, they’re reactionary and fairly lemming-like.

Q: It doesn’t seem like anyone was happy with the deal worked out between the White House and Congress, but it only seemed like a matter of time before a credit agency like S&P took this step given that the long-term issues with the budget were not addressed.

JM: This is the first of several awkward debt dances we’ll be doing in the years ahead. The latest deal doesn’t come close to solving our longer-term issues. Namely, cutting entitlements. The sooner our elected officials can rip the band-aid off the better, but I expect we’ll keep seeing more political gamesmanship and less progress.

The Summer of Wreckovery continues

No doubt all of us would take some good economic news right now, but that won’t come from the jobs report for June, which was released this morning showing the unemployment rate rising slightly to 9.2% and adding only 18,000 jobs:

U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dampening hopes the economy was on the cusp of regaining momentum after stumbling in recent months.

Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists’ expectations for a 90,000 rise.

Many economists raised their forecasts on Thursday after a stronger-than-expected reading on U.S. private hiring from payrolls processor ADP, and they expected gains of anywhere between 125,000 and 175,000.

The unemployment rate climbed to 9.2 percent, the highest since December, from 9.1 percent in May.

Numbers from the two previous months were revised down by 44,000 jobs; April dropped from 232,000 to 217,000 and May from 54,000 to 25,000. In case you’re wondering, the economy needs to create around 120,000 jobs each just to keep up with population growth.

Another bad sign is the U-6 rate, what many economists call the “real unemployment rate,” jumped from 15.8% to 16.2%.

Just like government intervention in the economy in the 1930s prolonged the Great Depression, intervention and uncertainty with President Barack Obama’s economic policies are slowing the pace of recovery today.

EconStories Releases “Fight of the Century: Keynes vs. Hayek Round Two”

The folks at EconStories released their latest video today, depicting a “Round Two” of their earlier Keynes vs. Hayek hip-hop battle, as the two economists battle over the amount of government spending that should occur to bring America out of tough economic times, what defines prosperity, and whether spending should be top-down or bottom-up.

You should see some other familiar faces portrayed, and the security guard at the beginning is played by Duke University economist, Michael Munger.


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